I do not own this stock of Teck Resources Ltd (TSX-TECK.B, NYSE-TECK). In 2008, I wanted to cover some resource stocks and this is one that I decided to take a look at. The time to buy this stock is when it cuts its dividend. For example, I bought this stock in 2008 and sold in 2009. I bought this stock because the company purchased Fording Canadian Coal Trust at exactly the wrong time and got into financial difficulties and the stock price dropped off a cliff as they had to cut dividends. When the stock recovered somewhat in 2009, I sold for a profit.
When I was updating my spreadsheet, I noticed this is a cyclical stock. The stock price takes a dive every once in a while. It went down 30% in 1997 and then 48% in 1998. It went down 82% in 2008, 42% in 2011. Most recently it went down 41% in 2019.
The dividend yields are low with dividend growth non-existent. The current dividend yield is low (below 2%) at 0.64%. The 5, 10 and historical dividend yields are also low at 0.74%, 1.31% and 1.30%. The yield has varied a lot from a high of 25.45% to a low of 0%. In 2015 dividends were cut 33%, then cut 83% and then increased by 100% in 2017. They have been flat ever since. Analysts seem to think that they might rise them in the short term.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS cannot be calculated for 2020 because of an earnings loss. The 5 year coverage is 16%. The DPR for CFPS for 2020 is 6% with 5 year coverage at 4%. The DPR for Free Cash Flow for 2020 cannot be calculated because of a negative FCF. The 5 year coverage is 21%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is 0.50. The Liquidity Ratio for 2020 is 1.23. If you add in Cash Flow after dividends, it is 1.68. The Debt Ratio for 2020 is 2.01. The Leverage and Debt/Equity Ratios are 2.06 and 1.03
The Total Return per year is shown below for years of 5 to 27 to the end of 2020. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | -19.73% | 37.29% | 34.03% | 3.26% |
| 2010 | 10 | 0.00% | -8.16% | -9.37% | 1.21% |
| 2005 | 15 | -4.52% | 0.12% | -1.95% | 2.07% |
| 2000 | 20 | 3.53% | 10.56% | 6.53% | 4.04% |
| 1995 | 25 | 2.81% | 4.40% | 2.31% | 2.10% |
| 1993 | 27 | 2.60% | 4.69% | 2.64% | 2.06% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 2.19, 5.91 and 7.23. The corresponding 10 year ratios are 4.60, 8.32 and 11.15. The corresponding historical ratios are 6.45, 11.02 and 14.16. The current P/E Ratio is 7.43 based on a stock price of $31.34 and EPS estimate for 2021 of $4.22. The current P/E Ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $60.62. The 10 year low, median, and high median Price/Graham Price Ratios are 0.35, 0.59 and 1.00. The current P/GP Ratio is 0.52 based a stock price of $31.34. The current ratio is between the low and median 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 0.72. the current P/B Ratio is 0.81 based on a Book Value of $20,557, Book Value per Share of $38.70 and a stock price of $31.34. The current ratio is 13% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 4.59. The current ratio is 4.04 based on a stock price of $31.34, Cash Flow per Share estimate for 2021 of $7.76 and a Cash Flow of $4,122. The current ratio is 12% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 1.30%. The current dividend yield is 0.64% based on dividends of $0.20 and a stock price of $31.34. The current dividend yield is 51% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 1.31%. The current dividend yield is 0.64% based on dividends of $0.20 and a stock price of $31.34. The current dividend yield is 51% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.35. The current P/S Ratio is 1.34 based on Revenue estimate for 2021 of $12,445, Revenue per Share of 23.43 and a stock price of $31.34. The current ratio is 0.6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. The P/S Ratio test says this. I know that the dividend yield tests do not, but dividends were cut and have remained flat since 2017. Also, dividends have varied and were often flat for the 27 years I have covered. They have increased 7 times and declined 3 times over 27 years. The other tests say the stock price is reasonable and below the median except for the P/B Ratio test that says the stock price is reasonable but above the median.
Is it a good company at a reasonable price? The price seems to be reasonable. However, this is a very cyclical stock. It might be best to buy when cheap and not hold for the long term.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (8) and Hold (7). The consensus would be a Buy. The 12 month stock price is $36.21. this implies a total return of 16.18% with 15.54% from capital gains and 0.64% from dividends.
Some analysts on Stock Chase do not like it because it is cyclical, other think we are in the very early stages of a basic materials cycle. Amy Legate-Wolfe on Motley Fool thinks this is a solid company to buy and hold during the pandemic recovery and beyond. The Executive Summary on Simply Wall Street gives this stock 3 stars out of 5 and lists 2 risks. A writer on Simply Wall Street talks about ownership of this stock, but seems to have missed that the company has two levels of shares (A and B shares). A writer on Simply Wall Street is concerned about the level of debt of this company. Zacks Equity Research for an Nasdaq article says that this stock is currently undervalued. Dinesh Nair and Ed Hammond on Bloomberg says that this company is considering sale, spinoff of metallurgical coal business.
Teck is a diversified miner with coal, copper, zinc, and oil sands operations in Canada, the United States, Chile, and Peru. Teck ranks as the world's second- largest exporter of seaborne metallurgical coal and is a top-three zinc miner. Its web site is here Teck Resources Ltd.
The last stock I wrote about was about was Linamar Corporation (TSX-LNR, OTC-LIMAF) ... learn more. The next stock I will write about will be Logistec Corp (TSX-LGT.B, OTC-LTKBF) ... learn more on Friday, October 1, 2021 around 5 pm. Tomorrow on my other blog I will write about Dividends Beat Share Price Gains.... learn more on Thursday, September 30, 2021 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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